Over the last few years I have been following the progress of the Digital writing product vertical. Despite seemingly countless chops and changes in strategic direction, for the most part there has been sustained and significant growth in the digital pen market. Contrary to the often reported categorisation of Digital Writing as a ‘niche’ consumer and enterprise product, this growth is predicted to continue through the coming years. The latest forecast indicate a 17.6% compound annual growth rate (CAGR) between 2016 to 2022.
So if this is a consumer niche product, and enterprise markets are only interested in surface and glass based unstructured data capture what is driving this growth?
In a broad sense, global market growth has been driven largely by an interest of early adopters in the digital learning and digital art space. Also, a number of mergers and acquisitions have contributed to investors taking a keen interest in the digital writing market, enabling capitalisation of R&D and innovative partnerships between brands and tech players like Audi and Myscript.
While the hard numbers of digital pen sales have originated mainly from the US and EU over the last 18 months interest levels have been consistently rising in the emerging economies of Asia-Pacific, Latin America, Middle East and Africa.
The Asian and South East Pacific is expected to see the fastest growth, driven by the emerging economies of China and India. Both of these markets have a rapid growth middle class segment of made up of pre validated consumers with digital pens widely sold through bricks and mortar and online retail outlets. While this product knowledge and obvious consumer benefit perhaps contributes to Enterprise pull through, you only need to take a walk through any office, university or public place in these countries to see that culturally, these consumers also love natural input writing.
These market trends in the Asia-Pacific region can be observed in the ‘DNA’ growth strategy of Anoto Group AB (Anoto).
In August 2016, Anoto entered into the Chinese education market through striking a deal with TStudy China. Anoto is well underway in its contracted comittment of delivering 120,000 pens between 2016 and 2017. TStudy is a major player in the education sector. China emphasizes primary school students to practice penmanship with Chinese characters. So the market for digital pens in the education sector is huge. The deal means a major step forward for Anoto’s digital pen penetration into the Chinese market. While this deal was in the making for years, (Anoto had developed a joint venture with TStudy back in 2011) it is likely we can expect similar deals and expansions in the future, as this type of technology and public policy partnerships, generate long term and generally low complexity scale up after the initial proof of concept.
Anoto has recently struck another deal with the Region’s other super consumer market: India. It has named Trata E-Systems as its master Indian distributor. Trata will distribute Anoto’s products for three years. Trata will have the right to renew the deal if they order at least 1 million pens in the first term. Over the initial three-year period, the estimated transaction could reach USD 100 million. Whereas the Chinese market is fuelled by educational needs, the Indian market is seeing the digital pen growth in the government sectors. India’s government offices are going through modernisation and digital pens are being embraced as a viable tool to achieve this goal. This administrative pain point and race to modernisation of public information systems and processes, is a theme of growing importance throughout the Southeast Asian region.
From Anoto’s positive growth in the Asia-Pacific region, it appears to me that the emerging economies hold great promise for the future of digital writing. “So what!” you may say, “what relevance does an Indian public servant filling out a license application using a digital pen, have to the growth of the digital writing in North America?” If the emerging markets start generating larger profits, we will start seeing more interest from the US and EU producers, integrators, value added resellers and ultimately consumers. It is likely this renewed interest will provide more competition to deliver better products. Also, given the production focus of these tech products within the region that is driving their market adoption, the low manufacturing cost and a large pool of skilled labor, will also contribute to the future expansion in these regions.
The global markets are already responding in a positive way. Anoto’s growth is getting noticed by other major players. While the digital writing future has always looked bright, for the first time in its short lifecycle digital writing is finally generating the type of volume orders that have long alluded it in the developed economies. Ironically it may be the emerging economies that finally take this innovative technology to the mature market tipping point.